9:13 PM, October 31, 2013

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Detroit Free Press Business Writer

Potential Packard Plant buyer thinks long-term: Peru-based developer and potential Packard Plant buyer Fernando Palazuelo talks about his plans for the decaying complex if given the opportunity to purchase it from Wayne County following an online tax auction.
Brian Kaufman/Detroit Free Press

As of noon, Chicago-area housing developer William Hults had yet to wire the $2.2 million to back up his bid, said David Szymanski, the county's chief deputy treasurer. He has until the end of the business day. / Andre J. Jackson/Detroit Free Press

Fernando Palazuelo

Age: 58 Origin: Spain Residence: Lima, Peru Occupation: Real estate developer, founder of Arte Express Accomplishments: Has rehabbed more than 100 buildings since mid-1980s. Family: Married with five children, a sixth due next month. The two oldest work for his firm, the middle two attend Harvard University, youngest is 2 years old.

Time is running out for the second-place bidder in Wayne County's auction for the old Detroit Packard plant. / Brian Kaufman/Detroit Free Press

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International developer Fernando Palazuelo is so keen on the Packard Plant in Detroit because he believes it’s the largest industrial ruin of the 20th Century. And he wants a piece of that action.

Unlike most local developers, the 58-year-old Spaniard believes he can preserve and rehab sizable portions of the original structures — despite decades of decay, arson and metal theft. He envisions transforming the roughly 40-acre site into a residential, commercial and industrial hub.

“It has the size, it has the charisma and it has the history,” Palazuelo told the Free Press during an hour-long interview Thursday in the lobby of a Midtown hotel.

Even if Palazuelo, a resident of Lima, Peru, misses out on the Packard Plant, he said he is so intrigued by Detroit’s growth prospects and cheap real estate he’s considering buying other properties across the city. He particularly likes the many vacant industrial structures on the east side because they’re cheaply priced, easier to bring up to code than some downtown buildings and because the area is more accessible than downtown to the suburbs, he said.

“I think east Detroit is better located than downtown,” Palazuelo said. “I think with time, east Detroit is going to be slowly, slowly following the model of Midtown.”

Right now, his focus is on the Packard Plant, which he became aware of while reading coverage of Detroit’s July 18 bankruptcy filing. “The bankruptcy of Detroit was in all the newspapers of the world,” he said.

In August, Palazuelo traveled to the city to scope out investment opportunities, part of his business strategy of buying distressed urban real estate and then redeveloping it over a longer time horizon than is typical for developers.

He has been dubbed “El Conquistador Del Centro” by Peru news media for his redevelopment efforts in downtown Lima.

As the third-place bidder in Wayne County’s auction for the Packard site, he may not get his chance if a Chicago-area developer, William Hults, can deliver a $100,00 nonrefundable deposit by 3 p.m. Friday and also prove to county Treasurer Raymond Wojtowicz that he can wire the rest of his $2 million bid by Monday afternoon.

Hults has said he wants to rehab the plant into his own vision for a mixed-use development with shops, restaurants and apartments. He failed to come up with a $1-million payment last month to buy the property for its back taxes when the county gave him an exclusive pre-auction deal.

Hults originally was given a deadline of Thursday afternoon, but requested the same number of extra business days to assemble the funds that county officials gave the auction’s first-place bidder, Texas doctor Jill Van Horn. The county invalidated her $6 million offer Wednesday for failure to pay.

Palazuelo said the Packard Plant would be his biggest ever rehab project and the first in North America. He estimated the price tag at $300 million to $400 million.

He said his firm doesn’t currently have that magnitude of financing, but could assemble it over time through profits from its Lima buildings and the Packard plant’s first anchor tenants.

“For the technology of the 20th century, the Packard Plant is something really important,” he said. “You cannot just destroy the building.”

Packard memories

A native of Spain, Palazuelo fondly recalls how his great-grandfather owned a Packard car.

As a young man, Palazuelo served in Africa with the Spanish Foreign Legion, the country’s elite military force.

He got into property redevelopment in the mid-1980s, founding the firm Arte Express. Since then, he said he has completed more than 100 rehabs of old buildings, many of them in Spain and Lima, Peru, where he moved his family and his company.

His strategy has been to buy cheap by entering real estate markets where more conservative developers don’t see the growth potential.

He said he bought some of his Lima buildings for $100 per meter and can now rent space out for $1,800 to $2,000 a meter.

“We have been able to create 15,000 jobs in five years,” Palazuelo said. “The value of our assets in Lima are around $200 million.”

Palazuelo said his firm has the cash to pay his $2,002,000 auction offer on the plant. The county is asking Hults for $2,003,000.

He boldly declared that if the county treasurer accepts his money, he would monitor the redevelopment project by living inside the abandoned auto plant. He didn’t get into details, but said: “If the county (sells) me the Packard Plant, I will be living in the Packard Plant. ... Believe it.”

He compared his property development efforts to war. And a successful general cannot live apart from his troops, he said.

“You need to be with all your soldiers, with all your army, in the (front) line of the battle,” he said. “The project in east Detroit — the Packard Plant — has a lot of elements in common with a war. It’s going to be a battle.”